Jabal Omar Development, a Riyadh-listed real estate company, raised $135 million (Dh496m) through an Islamic bond issuance to fund the development of property projects in and around Mecca.

Shuaa Capital, the UAE-based financial services group, was the sole arranger for the private placement of the five-year sukuk, the company said in a statement to the Dubai Financial Market on Wednesday. The sukuk was issued in the second half of 2018 but the announcement of the issuance and private placement was made on January 9.

“Sukuks represent an ideal financing mechanism for the long-term funding requirements of real estate, as reflected by the dominance of the sector in issuing sukuks over the past 18 months in the region,' Fawad Tariq-Khan, chief executive of Shuaa, said.

Saudi Arabia's construction sector is set to grow 5.5 per cent year-on-year in 2019, according to Fitch Solutions. Overall, the construction sector in Mena will grow at the fastest pace globally this year as regional governments continue to invest in infrastructure projects and rebuild conflict areas.

Jabal Omar, which is one of the biggest publicly-listed real estate companies in Saudi Arabia, is developing a multi-use property mega-project spanning two million square metres near The Grand Mosque in Mecca.

Funds from the sukuk will help diversify its capital base as it develops projects around the holy city, according to the statement. It did not specify the projects to be funded by the sukuk.

The company is looking to develop other strategic areas of the city close to the Grand Mosque, including the reconstruction of poorly developed areas into developments that comprise hotels, residential and commercial facilities and shops, it said last year.

Sukuk issuances raised $97.79 billion globally in 2017, up 45 per cent year on year, according to the statement. Saudi Arabia raised $26bn in Islamic bonds that year.

Saudi Arabia is seeking to reduce its reliance on oil revenues and diversify its economy and made announcements for mega-projects in tourism, entertainment and renewable energy last year.